Structuring your investments is a critical consideration as you approach retirement. But how do you structure them? How do you fund your retirement in the right way, achieving reliable growth of wealth as well as cash flow?

Let's take a look.

Adjust asset allocation with annual maturities

As you structure your investments for retirement, you need to consider two things — long-term growth and short-term cash flow. This latter consideration, cash flow, will help you maintain the lifestyle you want to enjoy during your retirement years.

To have adequate cash flow, you might have to sell stocks and holdings on an annual basis if your investments don't generate sufficient ongoing income. You can make this easier for yourself by choosing to invest in short-term maturities such as bonds. These short-term instruments will enable you to invest over a fixed period with a guaranteed maturity at the end of the period, helping you achieve a reliable cash flow during retirement. The amount of income will be less, but you gain peace of mind in knowing the funds are there when you need them.

Shelter your investment income in the right way

To the extent that your investments produce interest income, you need to focus on achieving tax efficiency. Interest income is taxed at a higher tax rate than income from Canadian dividends and capital gains. If you earn interest income within a TFSA (tax-free savings account) or RRSP (registered retirement savings plan), and you earn dividends and capital gains in a taxable account, you can reduce the taxes you would otherwise pay. However, you may be limited in the amount of money you can shelter in your TFSA and RRSP, so you’ll need to organize and plan carefully.

The best bet is to save your long-term investment gains in a TFSA and put your income from the bonds mentioned above in another account. You may choose a locked-in retirement account (LIRA) or RRSP for this.

Diversify investments

What is the safest investment strategy for retirement? The safest strategy is always a diverse strategy — investing in stocks, bonds and other holdings that are independent so that if one investment is struggling, this does not adversely affect your other holdings.

It can be challenging to know exactly how to diversify your investments, which is why it is essential to speak to an investment specialist or wealth management professional before you make your decision.

Speak with our advisors or book a portfolio review today

Here at Bellwether, we can help you make the right choices about funding retirement. Book an investment portfolio review today, free of charge, or speak to our team to learn more.